The Niobrara is an Upper Cretaceous formation composed of chalk limestone and shale at various depths depending on where the Niobrara is encountered. The play is sometimes referred to as the Codell/Niobrara because the Codell Sandstone is nearby and production from the two formations is sometimes commingled. There is also a shallower part of the Niobrara formation, which produces mostly natural gas.

Early MoverEOG Resources has built up a position of 400,000 net acres here, and was so early in the play that the company's average cost is only $35 per acre.

EOG has drilled five wells so far in the Niobrara Shale, of which three are complete. The Jake 2-01H, the company's first well, produced 50 Mbo in the first 90 days. The maximum production rate on the three wells completed ranged from 730 to 1,558 barrels of oil per day. The company said that the play was in too early a stage of development to estimate the recoverable resource potential or the economics of drilling.

Other PlayersAnother company with acreage in the Niobrara is MDU Resources (NYSE:MDU), which has 27,000 net acres in the play. The company hasn't publicly disclosed any development plans yet here.

Petroleum Development Corporation (Nasdaq:PETD) also has acreage in what it calls the Codell/Niobrara formation in the Wattenberg field in Colorado. The company has 72,000 gross acres and is drilling new wells as well as refracturing older wells.

Petroleum Development Corporation also has 127,000 gross acres in the NECO area in Colorado and Kansas. The company is targeting natural gas reserves here at shallower depths of between 1,500 and 3,000 feet.

HistoryThis is not the first time the industry has tried horizontal drilling into the area, although it's not clear if they were targeting the same oil and liquids rich interval or the shallower natural gas formation in the Niobrara.

Twenty years ago, Union Pacific Resources Group drilled and completed several horizontal wells here. One was the No. 1 McGahan 21-5 in the Silo Field, an area that EOG Resources mentioned at its analyst meeting as a promising area. Anadarko Petroleum (NYSE:APC) purchased Union Pacific Resources Group in 2000.

The Bottom LineInvestors should expect to hear more about the Niobrara Shale over the next few years, as the exploration and production industry continues to find oil and gas in the United States, an area written off by some as mature and unproductive. (To learn more, check out our Oil And Gas Industry Primer.)